Information Disclosure Based on TCFD Recommendations

Action on the TCFD Recommendations

The Group recognizes that addressing the risks associated with climate change, which has become a global issue, is one of its most important challenges.The basic philosophy of the SANKYO Group is to fulfill its mission, namely, to contribute to the sound development of pachinko and pachislot, which are popular leisure activities in Japan, and to the quality of life in society as a leading company in the pachinko and pachislot industry. Through consideration for and cooperation with all stakeholders, including customers, suppliers, shareholders, employees, and local communities, the Group aims to realize both a sustainable society and continuous corporate growth so as to enhance corporate value.
In order to further concretize this basic philosophy, the Company has decided to establish a Sustainability Committee and promote sustainability initiatives.
Regarding our response to climate-related issues, we endorse the Task Force on Climate-related Financial Disclosures (TCFD) and have disclosed information using the framework recommended by the TCFD.

The Group will continue to promote decarbonization and contribute to the realization of a sustainable society by disclosing climate-related information.

Governance

The impact of climate change is becoming increasingly serious with every passing year, jeopardizing economic, social, and environmental well-being. The international community is stepping up initiatives to hasten the emergence of a low-carbon, or a decarbonized, society, and companies are expected to contribute vigorously through their own efforts to the success of these global initiatives.

The SANKYO Group is addressing various issues relating to sustainability, including global environmental issues, human rights, employee health, and the working environment, as well as engaging in awareness-raising activities to ensure fair and appropriate treatment of employees.

Regarding our response to climate change, we will form project teams under the Sustainability Committee to address each issue and promote group-wide sustainability policies,target setting, and specific measures. The Board of Directors and the Management Committee will receive reports on important matters from the Sustainability Committee and will deliberate on, supervise,and provide guidance regarding policies and action plans for addressing climate-related challenges.

■Governance System

The Board of Directors and Executive Committee give instructions to the Sustainability Committee and receive reports from it. The Sustainability Committee gives instructions to the project team to consider specific measures, and the project team reports the results. The project team carries out annual plans, implements and promotes measures, checks progress, and determines annual results in line with the management cycle of planning, execution, confirmation, and revision. The project team discloses information to stakeholders and utilizes their evaluations.

Strategy

Scenario Analysis Overview

The Group conducted a scenario analysis based on the climate change risks and opportunities highlighted in the TCFD recommendations. In this analysis, it was necessary to select and set scenarios for multiple temperature zones, including the 2℃ or lower scenario.
Therefore, two scenarios were selected: the 1.5℃ scenario, where transition impacts become evident, and the 4℃ scenario, where physical impacts become apparent.

■Projected change in global average surface temperature (difference from the 1986-2005 average)

※source：Figure SPM.8 in IPCC, 2021: Summary for Policymakers. In: Climate Change 2021

【1.5℃ Scenario】
Scenarios in which severe measures are taken against climate change and the temperature rise is suppressed to about 1.5°C or less by 2100 compared to before the industrial revolution.
Scenarios of increased transition risks in policy and regulation, markets, technology, and reputation.
*1 The SSP 1-1.9 scenario was used, by referring to information from the IPCC and the IEA.

【4℃ Scenario】
Scenarios in which effective measures against climate change are not in place and temperatures rise by about 4°C by 2100 compared to before the industrial revolution.
Scenarios of increased physical risks, such as more severe natural disasters, rising sea levels, and more extreme weather events.
*2 The SSP 5-8.5 scenario was used, by referring to information from the IPCC and the IEA.

1.5℃ Scenario

In the 1.5℃ scenario, impacts related to the transition to a decarbonized society are expected, including the introduction of a carbon tax and regulations on the use of fossil fuels.
For the Group’s business, risks include an increase in operating costs due to the introduction of carbon pricing (such as carbon taxes and emissions trading systems) and a rise in electricity prices driven by renewable energy policies. Additionally, an increase in manufacturing costs due to the rise in raw material prices are anticipated. On the other hand, opportunities may arise by promoting the recycling of used equipment and the reuse of parts, which can enhance our environmental initiatives and lead to improved external evaluations.

4℃ Scenario

In the 4°C scenario, the physical impacts of climate change, such as the intensification of extreme weather events, are expected.
For the Group’s business, risks include damage to manufacturing sites and offices, as well as reduced sales due to business closures resulting from increasingly severe weather conditions. Furthermore, the rise in average temperatures could lead to higher utility costs and potential health issues for employees. There is also a possibility that an increase in infectious diseases and changes in weather patterns may reduce opportunities for people to go out, leading to a decrease in visitors to pachinko and pachislot parlors.

As part of risk mitigation initiatives in our mainstay pachinko machines and pachislot machines businesses, we are working to reduce industrial waste emissions by promoting standardization of components from the product design stage. In addition, we are continuously pursuing product development with a focus on recycling, aimed at reusing components and resources..SANKYO Group will further deepen its efforts to reduce environmental impact and improve management efficiency.

Potential Climate Change Risks and Opportunities

Risk Management

The Group considers climate change-related risks to be one of its major risks. We regularly identify climate change risks and opportunities through scenario-based analysis of overall risks that may affect management policies and strategies.
Identified risks and opportunities are primarily discussed by the Sustainability Committee and the Environmental Measures Project Team, with those deemed highly significant reported to the Board of Directors and the Management Committee.
The Board of Directors and the Management Committee oversee the Group’s risks and opportunities, determine specific measures and policies for the risk management system, instruct the development of measures to minimize the impact,and manage progress.

Indicators and Targets

To reduce the Group’s greenhouse gas emissions (Scope 1 and Scope 2), we are promoting initiatives to curb emissions at each site.
Moving forward, we will consider setting targets for reducing greenhouse gas emissions, further promote energy saving measures through the adoption of LED lighting, and explore the introduction of renewable energy sources such as solar power utilization.
As part of our initiative to utilize renewable energy, we installed a PPA-based photovoltaic system on the roof of our subsidiary SANKYO EXCEL’s plant. We aim to reduce CO2 emissions by using the electricity generated there. From November 2023 to March 2024, we reduced CO2 emissions by approximately 117 tons.